Thursday, March 15, 2012

Banks Making A Comeback

The whole financial sector is on fire, especially after the latest stress test results. Many banks have been extremely strong performers YTD, after most had a horrible 2011. Many banks have just announced major share buybacks and dividend hikes. Although I'm not sure that I'm ready to have any banks in my portfolio, there are quite a few making a strong case as they get back on the dividend growth train. Let's take a look at a couple of the more well known banks and see how they're doing.

Wells Fargo & Company (WFC) has just recently announced a major dividend increase, and has upped its dividend from $0.12 per share quarterly to $0.22 quarterly per share. This is an 83.3% increase in the dividend. They also announced an increase in share buybacks as they look to continue to richly reward patient investors. WFC is becoming more attractive here, and is still priced fairly cheaply with a P/E ratio of 11.83 and a P/B of 1.4. I'm currently taking a look at WFC, even after the strong run it's had lately. It now yields 2.63%. I think further increases in the dividend are ahead of us. The payout ratio is a lowly 31%.

U.S. Bancorp (USB) is a strong regional bank, and recently raised its dividend by 56%. It now pays $0.19 per share quarterly, up from the previous $0.13 per share quarterly. This is a strong increase, and it now yields 2.48% based on the revised payout. It's still a cheap stock with a 12.82 P/E and a 1.9 price/book. I think that USB is one of the stronger regional plays and will likely continue to raise the dividend and repurchase shares long-term. The payout ratio currently stands at 31.7%.

What about you? Looking at any banks right now?

Thanks for reading.

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